- Bitcoin steadied at around $112,000 after recent market volatility.
- Elon Musk made a bullish move on bitcoin, affecting market sentiment.
- Federal Reserve chair Jerome Powell signaled a possible end to the Fed’s balance sheet reduction soon.
- Wall Street institutions increased investment in bitcoin, with exchange-traded funds (ETFs) reaching record levels.
- The Fed is expected to cut interest rates again, which could benefit risk assets like bitcoin and tech stocks.
Bitcoin’s price stabilized at around $112,000 after several days of unstable trading. The rebound followed a surprising, positive intervention from Tesla billionaire Elon Musk.
At the same time, concerns remain in the market, especially after a recent price drop and a strong warning from financial firm BlackRock. Federal Reserve chair Jerome Powell announced that the Fed is getting close to ending its quantitative tightening program, which has reduced the central bank’s balance sheet since 2022.
In a speech at the National Association for Business Economics conference in Philadelphia, Powell explained, “Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions.” This was reported by CNBC. Powell also noted that interest rate cuts remain possible as the Fed watches indicators closely.
The Fed’s tightening program began in 2022, shrinking its balance sheet from roughly $9 trillion to $6.6 trillion. According to David Morrison, senior market analyst at Trade Nation, “The Fed has been gently reducing its balance sheet, thereby tightening monetary policy. Powell suggested that this reduction programme may soon be wound down.”
The end of quantitative tightening comes as Wall Street institutions have been investing more heavily in bitcoin. Bitcoin ETFs have reached new highs as major financial players increased their participation. Gadi Chait, head of investment at Xapo Bank, wrote, “This institutional firepower, combined with the Federal Reserve’s dovish stance following September’s rate cut and ongoing macroeconomic uncertainties… reinforced bitcoin’s emerging role as a digital hedge alongside Gold.” Gold also recently surpassed $4,000 per ounce.
The Fed held interest rates steady into 2025 due to inflation concerns, only cutting rates last month. Now, U.S. labor market issues are in focus for policy makers. Morrison added, “The markets continue to factor in the likelihood of two 25 basis point rate cuts before the year-end.”
Some analysts say the upcoming Federal Open Markets Committee (FOMC) meeting in late October could influence bitcoin’s path further, either fueling a continued rally or leading to a period of price consolidation. Lower interest rates are often considered favorable for assets like bitcoin and high-growth technology companies.
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